Having Women on Corporate Boards Increases Profits and Sustainability

Board RoomImagine running an oil company where only one or two of the directors on your board have oil industry experience. Imagine running a computer company where none of the board uses a computer, tablet or smart phone. Now imagine corporate America running their businesses where less than 15 percent of their boards are women.

Women are not a minority except in terms of their parity with men on corporate boards. While women account for over 50 percent of college graduates and they dominate economic power in our economy with $8 trillion of annual buying power, they still account for less than 15 percent of S&P 500 boards of directors. Three percent of Fortune 1000 companies have no women on their board of directors. For the next tier of 1,000 midsize companies the level of ZERO women representation on the boards jumps to 30 percent.

The business case for women directors

Women serving on the board of directors is a best practice for winning business success. Research by Catalyst documents that Fortune 500 companies with women on their board of directors achieve the following superior business results:

  • Higher Return on Equity: On average, companies with the highest percentages of women board directors outperformed those with the least by 53 percent.
  • Superior Sales: On average, companies with the highest percentages of women board directors outperformed those with the least by 42 percent.
  • Higher ROI: On average, companies with the highest percentages of women board directors outperformed those with the least by 66 percent.

Catalyst’s research found that the companies with the best financial results were achieved by companies with more than three women board of directors.

Women board of directors enable sustainable business results

Sustainability is a core business attribute being adopted by companies across industries including Ford, HP and Clif Bar. Sustainable best practices are proving to reduce supply chain risks, lower costs, deliver more reliable customer service and increase sales. Sustainability is also proving to be a key path for winning millennial generation customers. A growing number of companies including Chipotle, Tom’s Shoes and Unilever are winning millennial generation customers by aligning with this generation’s focus of being cool with a purpose.

Kellie McElhaney, the Whitehead Faculty Fellow in Corporate Sustainability for the Haas School of Business at University of California, Berkeley and Sanaz Mobasserir, a PhD candidate at the Haas School, conducted original research on female board of directors and corporate sustainability. They investigated the corporate performance of more than 1,500 companies across three main categories of environmental, social and governance. Their key findings were that companies with more women on their board of directors are more likely to:

  • Invest in renewable power generation and to proactively take steps to improve operational energy efficiency
  • Have integrated climate change into their actuarial models and developed products that help customers manage climate change risk
  • Measure and reduce carbon emissions of their products
  • Have supplier programs to reduce their supply chain carbon footprint
  • Reduced the environmental impacts of their packaging
  • Address environmental risks in their financial decisions
  • Not disturb large and/or fragile areas of biodiversity

The emerging evidence is that women on a company’s board of directors are helping their companies better serve their equity owners’ interests through enhanced environmental, social and governance risk-positioning.

Exclusive interview with Kellie McElhaney

The following exclusive interview with Kellie McElhaney was conducted at the Sustainable Brands 2013 conference where she participated with a number of women business leaders on a panel addressing business gender equality. Her voice on this subject is authoriative and compelling on the specific barriers to placing women on the board of directors.

Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017

Founder of Earth 2017. Author of The Boomer Generation Diet: Lose Weight. Have Fun. Live More that Jen Boynton, Editor in Chief of Triple Pundit , says is "Written in Bill Roth's lovable, relatable tone. A must read for any Boomer who is looking to jumpstart their health and have fun at the same time. I hope my parents read it. "

13 responses

  1. Excellent insights, Bill. May I suggest a further thought to add to your conclusions? The presence of female board members and success may be correlative and driven by other common behaviors. That is, both female board members and success might come from corporate behaviors such as risk-taking, innovation, open-mindedness, etc. If that’s the case, we might also see success among companies who elect minority board members or family-owned companies that elect non-family board members.

    1. Good points all. The key appears to be having a diversity of perspective that enriches a board’s perspective and decision making. As Kellie’s research documents female board members contribute to enriching decision making.

  2. Fantastic research by Kellie. Well done! It’s so critical to better understand the antecedents to economic value creation, and clearly, having women better represented on boards is essential. My PhD research shows that better team interaction at the board level generates better financial performance, supporting Kellie’s research. As it has already been proven that women on teams generate better team performance, the bottom line is that women are instrumental in generating economic value creation. Their presence in any team will serve to leverage collective knowledge, innovation and results.

  3. I am executive director of 2020 Women on Boards, a national campaign to increase the board seats held by women to 20% by 2020. We publish the first-of-its-kind gender diversity directory of corporate boards. Your readers can find out the board composition of over 1500 companies. Look for the directory and join the campaign at http://www.2020wob.com.

    1. Malli, thank you for your leadership! I will definitely be visiting your website to learn more.

  4. Good story, Bill. Catches attention right away. You might enjoy my new book “The Board Game–How Smart Women Become Corporate Directors” on Amazon.com. Best regards, Betsy Berkhemer-Credaire

  5. Bill, if more women on corporate boards led to higher profits, it would show up in longitudinal studies. And it doesn’t. I invite you to point me to even one such study. Hint: no such study exists, worldwide. In the past 18 months I’ve invited dozens of organisations, and hundreds of individuals supporting ‘more women in boardrooms’ to supply me with even one longitudinal study supporting their claims of enhanced financial performance, and have never received one).
    We have five longitudinal studies showing corporate financial performance DECLINES following increased female representation on boards. Abstracts of those studies, and links to them, here:


    What of studies by Catalyst, McKinsey, Credit Suisse and others, seemingly showing a positive effect? If you look at the reports, all say they’re reporting correlation, not causation, AND CORRELLATION CANNOT BE SAID TO AN INDICATION OF CAUSATION, NOR EVEN IMPLY IT. There are far more credible reasons for those correlations than any mythical ‘gender effect’.
    I invite anyone interested to learn the truth about this matter to email me at mb1957@hotmail.co.uk. Thank you.
    Mike Buchanan

    1. Mike, Just looked at your studies and they also DO NOT SHOW causation. Statistically it would be near impossible to show causation as you have to test under the same conditions and be able to exclude all other external effects and be able to show it repeatedly under various scenarios.

      I do agree that merit is the best for business but you CANNOT say that all the men in senior positions today are there on merit. That is just a down right fallacy. And the truth is that women who are better qualified have been overlooked for positions and promotions for years – and that is what needs to be rectified. So yes agree wholeheartedly – let’s promote based on MERIT!! Finally. That would be fantastic and business will benefit.

  6. Indian Hotels Co. Ltd. running the Taj chain of hotels, one of the biggest in India with a high complement of women on its staff and clientele presently doesn’t have any woman on its Board, contrary to good corporate governance norms. The last industrialist Anu Agha who was eminently qualified chose to step down. No one is proposed in her place in this Annual General Meeting.

    The company, once a jewel in the Tata crown, is in doldrums – a 12 page article in the Fortune magazine says it all. The share price is plummeting. There are big name Directors who can’t find time to attend Board and Shareholder Meetings for years and are yet figureheads on the Board.

  7. Bill! you’ve made a huge contribution here, weighing in with your renowned reputation for results in this argument for gender diversity on boards. Whether the presence of women on boards is causal of sustained higher performance or co-incident with it, such diversity is a marker of the high-performing organization today. Just like a company’s ES&G ratios have (at least since we’ve studied them in 2006) become a marker for preference in institutional investment markets. Can’t prove causality, but it’s nuts to deny the correlation of ‘enlightened management policy’ with sustained high performance. Congrats and thanks for moving this needle, Elsie

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